Opening Bell: 05.21.13 - Dealbreaker

Opening Bell: 05.21.13

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Apple’s Web of Tax Shelters Saved It Billions, Panel Finds (NYT)
Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue. ... “There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

JPMorgan investors on edge over vote on Dimon; what if they win? (Reuters)
Investors say that while Dimon, 57, may need more oversight after the bank posted $6.2 billion in losses from failed derivative trades last year, they do not want him to quit. Among big bank CEOs, Dimon ranks first for stock returns and has been praised for leading the bank through the financial crisis with no quarterly losses and a strong balance sheet. If Dimon were to leave, the bank's shares could fall as much as 10 percent and erase about $20 billion of market value, according to Mike Mayo, a bank analyst with brokerage CLSA. JPMorgan also has no ready replacement for Dimon, Mayo wrote in a research note, adding that the two lieutenants best positioned to succeed him - Matt Zames, 42, and Mike Cavanagh, 47 - seem to be about three years short of being ready for the job.

SAC Capital Aims to Stem Withdrawal Requests (DealBook)
“I’m very comfortable and confident having my money with him,” said Ed Butowsky, managing partner of Chapwood Investments in Dallas, a firm that invests client money in SAC. “All I know is that the returns are coming in nice, and my clients are happy.”

Funds Get Active Over Director Pay (WSJ)
Current pay structures don't give directors enough of a stake in making sure the company does well, and boards need to be more creative about tying their compensation to performance, said John Wakeman, a vice president and portfolio manager at mutual-fund giant T. Rowe Price Group Inc. "If bad people are going to be on these boards, we've got to stop it," said Mr. Wakeman. "We owe it to our fund holders."

Buffett Jets Chief Says U.S. Leads Private-Flight Rebound (Bloomberg)
The U.S. is leading a recovery in demand for private flights while Europe remains weighed down by economic weakness, the head of billionaire Warren Buffett’s jet-management company said. “The U.S. from our perspective is coming back and doing relatively well,” Jordan Hansell, chief executive officer of Berkshire Hathaway Inc.’s NetJets, said by phone yesterday from Geneva, where he is attending the European Business Aviation Convention & Exhibition. “Europe has remained difficult.”

Poor li’l rich kids: Posh schools scold parents who send nannies (NYP)
Wealthy New Yorkers are shunning their parental duties — choosing instead to send nannies to their children’s private schools to take part in everything from “safety patrol” to accompanying the kids on their entrance interviews. ... “Now the schools are getting angry — and other parents are getting angry. They don’t want to work the school bake sale with someone’s paid employee,” Uhry said. ... But one Upper East Side mom whose daughter attends The Birch Wathen Lenox School sniffed that she pays the school $40,000 a year — and can’t be bothered with such menial duties. “These schools are exorbitantly expensive, they hit you up for school fees, donations, and then they want your time?” she huffed. “I have three kids at three different schools. If I can send my nanny, I’m happy to do it.”
Former Horace Mann admissions director Dana Haddad said schools now accept nannies at admissions interviews because kids tend to perform better in front of them. “When I was a director of admissions and children would act up, I would tell parents, ‘Don’t worry, send them back with the nanny,’ ” said Haddad.

Europe's Recession Sparks Grass-Roots Political Push (WSJ)
The backlash has taken many forms. A group called Record Your City Council Meeting makes video recordings of public meetings and posts them online, risking fines where such reporting is banned. Activists secured more than 1.4 million signatures for a relaxation of Spain's strict home-foreclosure laws, prompting Parliament to reconsider them. "People are becoming aware that they need to participate in institutions to make them more democratic," said Mario Cuellar, a member of the video-recording group. "We need to reclaim politics from the chorizos," using a slang term for thieves.

Thousands of French Households Taxed Over 100% (CNBC)
More than 8,000 French households' tax bills topped 100 percent of their income in 2012, according to a French newspaper report. ... The paper said this was due to a one-off levy imposed on the 2011 incomes of households with assets of more than 1.3 million euros ($1.67 million). The surcharge was introduced by socialist President Francois Hollande in an attempt to offset the cost of a rebate scheme and taxation cap introduced by former President Nikolas Sarkozy, the paper added.

Qatar snaps up stakes in key lenders (FT)
Qatar is launching another multi-billion dollar push into the banking sector, buying fresh stakes in Russia’s VTB and Germany’s Deutsche Bank. The Qatar Investment Authority, the principal fund responsible for allocating the gas-rich emirate’s vast wealth, is poised this week to invest up to $1bn as part of a $3.2bn capital raising by VTB, Russia’s second-biggest bank, according to people close to the transaction.

Blackstone Leads Latest Chinese Privatization Bid
A fund run by the Blackstone Group is leading a $662.3 million bid for a technology outsourcing firm based in China, the latest example of a modest boom among buyout shops backing the privatization of Chinese companies listed in the United States. A consortium backed by a private equity fund of Blackstone, the U.S. investment firm, and including the Chinese company’s management said Monday it would offer $7.50 per share to acquire Pactera Technology International, which is based in Beijing and listed on the Nasdaq.

Bank Mergers in U.S. Seen Less Likely With Sellers Holding Out (Bloomberg)
“The regulatory risk of getting a deal nixed at the 11th hour is certainly higher than a year ago,” Brian Stephens, head of KPMG’s banking and capital markets practice, said in a phone interview. Leaders of smaller lenders that may sell themselves are saying, “I’ve gotten through the worst of times, and I see better times coming, so why do a deal now?”

Common Gnomes Pop Up at Rarefied Flower Show, to Horror of Many (NYT)
Some exhibitors went proud and loud, putting gnomes in places they would not be missed, like in the middle of the grass. Others seemed to feel that gnomes may be fine for other people, but certainly not any people they know, or want to know. One renowned landscape architect, Robert Myers, hid a gnome in a tree in his display, lost his nerve and took it out again before the judges could see it. “I don’t know where he went,” Mr. Myers said of his erstwhile gnome.

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Opening Bell: 01.23.13

Greece Charges Statisticians Over Size of Deficit (FT) Greece has brought criminal charges against the official responsible for measuring the country's debt, thereby calling into question the validity of its 172 billion euros second bailout by the EU and International Monetary Fund. Andreas Georgiou, head of the independent statistical agency Elstat, and two senior officials are accused of undermining the country's "national interests" by inflating the 2009 budget deficit figure used as the benchmark for successive austerity packages. The three statistical experts face criminal charges of making false statements and corrupt practices, a judicial official said, adding that if found guilty they could serve prison terms of five to 10 years. They have denied any wrongdoing. Spain's Recession Deepens (WSJ) Spain's central bank said a recession in the euro zone's fourth-largest economy deepened slightly in the final quarter of last year, but it said austerity cuts are bringing the country's runaway budget deficit under control. Obama-Bashing Swapped for Pragmatism at Davos (Bloomberg) “We have to move on in our society,” Blackstone found Stephen Schwarzman said today in an interview in Davos with Bloomberg Television’s Erik Schatzker. “I like President Obama as a person, and he’s well- intentioned.” Schwarzman, 65, warned in Davos in 2010 that banks could restrict lending because “their entire world is being shaken and they’re being attacked personally.” Later that year, at a nonprofit group meeting, he likened Obama’s tax proposals to Hitler’s invasion of Poland. Third Point LLC CEO Daniel Loeb, who in 2010 compared Wall Street’s Obama supporters to “battered wives,” will help lead a Jan. 25 Davos dinner discussion, “Can Capitalism Evolve?” Schwarzman apologized in 2010 for his comparison of Obama’s effort to double taxes on private-equity income to the invasion of Poland. He said the analogy was inappropriate and that the administration’s need to work with business “is still of very serious concern.” JPMorgan's Jamie Dimon Apologizes, Attacks (WSJ) James Dimon of J.P. Morgan Chase was prepared in Davos to apologize for the more than $6 billion of trading losses racked up by the so-called London Whale, but he certainly wasn’t prepared to abase himself...Min Zhu, deputy managing director of the International Monetary Fund, reeled off a string of statistics to show that the industry certainly hadn’t cleaned up its act since the crisis, and Paul Singer, principal of hedge fund Elliott Associates, was also keen to lambaste big banks, including Mr. Dimon’s. The two had some testy exchanges and the body language indicated that Messrs. Singer and Dimon have exchanged fire quite a few times previously. Still, Mr. Dimon gave us good as he got. He kicked off with repeating his apology to shareholders for the London Whale trading losses, which led to his own bonus being slashed, saying, “If you’re a shareholder of mine, I apologize deeply.” Having offered this apology he then went on the offense. He pointed out that his bank lent money to a whole host of worthy organizations such as schools, hospitals, governments, and Italian and Spanish corporates and governments. And he also had some snappy comebacks. Elliott’s Singer said that the global banks are “too big, too leveraged, too opaque,” which left Mr. Dimon with an easy retort about how could a hedge fund possibly criticize a bank about being opaque? “Our [securities filing] 10K is 400 pages long,” Mr. Dimon said. “What would you like to know?” Geithner Exit Next Friday (AFP) US Treasury Secretary Timothy Geithner, who steered the administration of President Obama through the financial crisis, will step down from his post Friday, a source told Agence France Presse yesterday. Golfer Mickelson recants tax rant (NYP) Mickelson — who hinted he might move from his home state of California to escape higher taxes — said he regretted his public rant on the issue after setting off a political firestorm. “Finances and taxes are a personal matter and I should not have made my opinions on them public,” according to a statement from Mickelson, who plans to elaborate today at the Farmers Insurance Open. “I apologize to those I have upset or insulted and assure you I intend to not let it happen again.” Senator Lautenberg Suggests Spanking In Store For Mayor Cory Booker (CI via DI) "I have four children, I love each one of them. I can't tell you that one of them wasn't occasionally disrespectful, so I gave them a spanking and everything was OK," Lautenberg said with a smile in his first public comments since Booker announced he was considering a run for Senate. Banker's Latest Bet: Teamwork on Bonds (WSJ) Texas banking tycoon Andrew Beal is known for making unconventional moves, including gambling on high-stakes poker and a self-financed plan to launch rockets into space. His latest gambit: an attempt to wring money from giant banks by banding together aggrieved bondholders. Mr. Beal's CXA Corp. ran a pair of advertisements late last year, one appearing in The Wall Street Journal. The ads listed an alphabet soup of residential mortgage-backed securities held by CXA and asked those with positions in the same securities to join the company in investigating possible infractions by banks that sold the debt. If the groups can prove the mortgages that underlie the bonds were approved through shoddy underwriting, they could be entitled to compensation—CXA's payday alone could be tens of millions of dollars. Firms Keep Stockpiles Of 'Foreign' Cash In US (WSJ) Some companies, including Internet giant Google, software maker Microsoft, and data-storage specialist EMC Corp, keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, according to people familiar with the companies' cash positions. In the eyes of the law, the Internal Revenue Service and company executives, however, this money is overseas. As long as it doesn't flow back to the U.S. parent company, the U.S. doesn't tax it. And as long as it sits in U.S. bank accounts or in U.S. Treasurys, it is safer than if it were plowed into potentially risky foreign investments. SEC Reins In Ratings Firm (WSJ) The U.S. Securities and Exchange Commission barred Egan-Jones Ratings Co. from issuing ratings on certain bonds, an unprecedented step by the regulator and a setback for a small credit-rating firm with a history of courting controversy. The SEC said Tuesday that Egan-Jones couldn't officially rate bonds issued by countries, U.S. states and local governments, or securities backed by assets such as mortgages, for at least the next 18 months. The ban was part of an agreement the SEC reached with Egan-Jones and its president, Sean Egan, to settle charges that they filed inaccurate documents with the regulator in 2008. The SEC alleged that Egan-Jones misled investors about its expertise, and that Mr. Egan caused the firm to violate conflict-of-interest provisions. Lindenhurst dentist busted after reporting to work reeking of booze and drilling teeth while allegedly drunk (NYDN) Dr. Robert Garelick was hauled out of his Lindenhurst office in handcuffs Monday after his dental hygienist smelled booze on his breath and caught him administering Novocain to the wrong side of a patient’s mouth. “I observed Dr. Garelick looking for cavities in the right side of the patient’s mouth, but the cavities were in the left side,” hygienist Kimberly Curtis told police in a written statement. “I pointed this out to the doctor and that’s when he ordered more Novocain for the patient,” Curtis told cops. “So now, he basically numbed the whole patient’s mouth.” After noticing Garelick’s wobbly behavior Monday, Curtis texted co-worker Dina Fara, who called 911. Curtis said she sent the message after Garelick used a drill to treat another patient who had a chipped tooth. “He was filing the tooth down,” Curtis said. “When you’re using that drill, you have to be very careful and have a steady hand.” She said that just before Garelick treated the chipped tooth, he slipped into his office. “I noticed that he was drinking from a white and purple squeeze bottle,” Curtis said. “At first I didn’t think anything was wrong,” Curtis said. “But right after, he took a drink from that bottle, he got up and walked past me. When he did this I smelled a strong odor of alcohol.” The dentist initially claimed he only had a couple of beers with pizza during lunch Monday, according to Suffolk County cops. But Garelick, who was charged with misdemeanor reckless endangerment, later confessed to his drunken dentistry while being taken to a police precinct in the back of squad car. “I never had any beers with my pizza. I’ve been sipping at that bottle all along today,” he told police, referring to his squeeze bottle filled with vodka, according to a criminal complaint.

Opening Bell: 4.9.15

Blankfein bet pays off; Activist food fight; HSBC faces (another!) criminal investigation; Bobcat vs shark; and more.

Opening Bell: 02.21.13

Feds Split Over When To Close Cash Spigot (WSJ) Minutes released Wednesday from the Fed's January policy meeting show officials concerned that the current easy-money policies could lead to excessive risk-taking and instability in financial markets. The Fed is buying $85 billion in mortgage and U.S. Treasury securities a month to drive down long-term rates and has promised to keep short-term rates near zero until unemployment improves. Citigroup Chairman Not Pressing Bank Breakup (WSJ) Michael E. O'Neill was among a small group of directors who after the financial crisis urged the company to weigh the pros and cons of splitting up the third-largest U.S. bank, said people familiar with the deliberations. Mr. O'Neill, now chairman, has overseen a management shake-up in the past year and is backing a broad cost-cutting plan. But exploring a breakup is no longer among his top priorities. Mr. O'Neill has concluded that breaking up Citigroup doesn't make sense now, given economic and regulatory uncertainty as well as a host of financial considerations, these people said. Wells Fargo ramps up private equity despite Volcker Rule (Reuters) The fine print of the Volcker Rule is expected to be finalized as soon as this year. Major banks such as Bank of America Corp and Citigroup are already pulling back from private equity investments ahead of the rules. But Wells Fargo is taking a different path. The bank invests in buyouts and venture capital deals largely on its own, with capital only from Wells Fargo itself and some employees. By avoiding equity from outside investors, the bank is considered to be engaging in "merchant banking," an activity that is likely to be exempt under the Volcker Rule, lawyers and people familiar with the matter said. Dimon Defends His Duel Leadership Roles (NYP) JPMorgan Chase CEO Jamie Dimon has no intention of relinquishing his chairmanship, insiders say, despite renewed calls from a group of shareholders to split the roles at the nation’s biggest lender. The American Federation of State, County and Municipal Employees, a granddaddy of public employee unions, as well as New York City and Connecticut pension funds, are pressuring the bank in the wake of its $6 billion “London Whale” trading blunder. The shareholders, which hold about $1 billion worth of bank shares, say the move would help to avoid a repeat of last year’s debacle, which led the board to slash Dimon’s pay in half. JPMorgan officials, though, don’t want to go as far as splitting the roles, saying their boss steered the bank successfully through the financial crisis and is well suited for both jobs. Regulator Weighs Ban For Corzine (WSJ) Two newly elected directors of the National Futures Association plan to push the agency to hold a hearing on the matter, having criticized the response of federal regulators some 16 months after the industry was shaken by the collapse of brokerage MF Global where the former New Jersey governor was chief executive. Shia LaBeouf Pulls Out Of Broadway's Orphans (NYP) Producers announced that LaBeouf parted ways with the show after just a week of rehearsals due to “creative differences,” even though the play’s scheduled to begin previews March 19. But last night LaBeouf, 26, posted e-mail exchanges on Twitter revealing divisions between him and bombastic Baldwin. In a message titled “Creative Differences” LaBeouf posted an e-mail to him from director Dan Sullivan, which reads, “I’m too old for disagreeable situations. You’re one hell of a great actor. Alec is who he is. You are who you are. You two are incompatible. I should have known it. This one will haunt me. You tried to warn me. You said you were a different breed. I didn’t get it.” Russia's Missing Billions Revealed (FT) Russia's central bank governor has lifted the lid on $49 billion in illegal capital flight - more than half of which, he says, is controlled "by one well-organized group of individuals" that he declined to name. Sergei Ignatiev, due to step down in June after 11 years in his post, is seldom outspoken about any issue other than interest rates. But he unburdened himself in an interview with the Moscow newspaper Vedomosti about money leaving the country through the back door, which he said equaled 2.5 percent of gross domestic product last year. "This might be payment for supplies of narcotics...illegal imports...bribes and kickbacks for bureaucrats...and avoiding taxes," he told the daily, which is part-owned by the Financial Times. New York Times Looks To Sell Boston Globe (CNBC) This follows the Times Company's sale of other regional papers as well as the About.com group, as it focuses in on its core asset — the New York Times brand. And with that focus, the publisher is honing in on what's really been working for the company — the New York Times subscription model. The company has retained Evercore Partners to advise on and manage the sale, but won't say who it's already talked to, or how much it thinks the assets are worth. Citi analyst Leo Kulp, who calls this a "positive move," estimates that the segment could fetch about $200 million. The segment generated $395 million in 2012 revenue, which Kulp says implies about $67 million in EBITDA in 2012. He applies a three times multiple — "on the high end of comparable large metro newspaper sales" — to give the paper a $200 million price tag. Herbalife Prez Goes On Offensive (NYP) President Des Walsh, in a conference call, said that “despite what we believe to be unprecedented, unfair and untrue attacks on this company, our business continues to do well.” Deputies: Couple started fighting over man scratching himself (WWSB) According to the Manatee County Sheriff’s Office, Shalamar Petrarca complained to her boyfriend, 30-year-old Ronald Howard, that it was rude and disgusting to be “scratching his testicles” while she was about to eat dinner. She told deputies that Howard began yelling at her, pushed her into the kitchen, causing her to get a scratch on her ankle, then threw her out of the house. Howard told deputies that she punched him in the eye for “scratching his balls”, and the he pushed her through the door in self-defense. Deputies say Howard had no visible injuries, but Petrarca did have a scratch on her ankle.

Opening Bell: 5.3.16

Mike Mayo wants Goldman to buy eTrade; Apple on historic losing streak; Miss Sweden is a big Donald Trump fan; and more.